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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
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Experience:  15years with H & R Block. Divisional leader, Instructor
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The instructions for the Hawaii N11 State tax form suggest

Resolved Question:

The instructions for the Hawaii N11 State tax form suggest to me that:

distributions from my University of California defined benefit plan and my wife's federal defined benefit plan (CSRS) are not subject to Hawaii state tax (but that our 401(k), 403(b), 457 and TSP distributions will be).

Is this a correct understanding? I believe that the defined benefit plans, although mostly funded by the employers involved some employee contributions. Does this make them ineligible?
Submitted: 6 years ago.
Category: Tax
Expert:  Robin D. replied 6 years ago.

Hello and thank you for using Just Answer.

Hawaii does not tax qualifying distributions from an employer-funded pension plan. If you received qualifying distributions from an employer-funded profit sharing, defined contribution, or defined benefit plan, or from a government retirement system (e.g., federal civil service, military pension, state or county retirement system), the pension plan does not have to be a "qualified plan" as defined in section 401 of the Internal

Revenue Code. As long as the payment is from the state of CA then they can be excluded form income. If the plans were from a Private Employer then they would be subject to partial taxation (the amounts you contributed would be taxed).

On line 13 of the N11 you will enter the amount from the plans so they can be subtracted from taxation for Hawaii. The 401(k), 403(b), 457 and TSP distributions will be taxable as they are from deferred plans and you made the contributions from wages that were never taxed. The main difference being that the defined plans are from another state government.

I sincerely XXXXX XXXXX information is helpful,

Customer: replied 6 years ago.
There's grey area here.

(1) "Hawaii does not tax qualifying distributions from an employer-funded pension plan."

From 1983-1991 I made a mandatory 2% contribution to UCRP. At that time the employer made similar contributions. (1991-2007 I made no contributions - neither did the employer as the plan was "over-funded"). So this does not appear to apply directly as I made (mandatory) contributions to the plan.

(2) My payments are not paid directly by the state of California, but by the University of California retirement system. Is this a "goverment retirement system"? I did find the statement - "The UCRP is a governmental defined benefit plan under the Internal Revenue Code section 414(d) that was established for employees of a state entity, the University of California.", which suggests it is, for this purpose.
Does this make it exempt from Hawaii State tax despite my contributions?

My non-expert reading of HAR 18-235-7-02 ( see ) says that is the case, but I'm not sure what takes precedence.

I did try calling the Hawaii State tax offices. They said I'd have to find out what fraction of my pension was employer-funded from the plan to determine the fraction exempt from state taxes. I believe she had it wrong. This is the rule for private pensions.

Can you shed more light on this?
Expert:  Robin D. replied 6 years ago.

Hello again,

You are correct. The University is considered a government retirement system and so falls under the exclusion.

You are allowed to exclude the university payments from taxation in Hawaii just as if it had been the university of Hawaii.

The individual you spoke to was no correct in stating that you needed to prorate the payments. In fact I thought so too at first glance but after a second look at the way Hawaii excludes these it is clear that they are not taxable to the state.

Robin D. and other Tax Specialists are ready to help you
Customer: replied 6 years ago.
Thanks. I hoped I'd researched it correctly!

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